Fall 2018 Regulatory Agenda Shows Where DOL’s Wage and Hour Division is Headed

Twice a year, in spring and fall, the federal government issues its Unified Regulatory Agenda.  This agenda sets forth upcoming rulemaking plans of all federal agencies.  The Fall 2018 agenda published in October addresses a number of Wage and Hour topics that have been on employers’ radar for some time. 

Fair Labor Standards Act (FLSA) White Collar Exemptions 

The DOL intends to issue a Notice of Proposed Rulemaking (NPRM) on the white collar exemptions in March of 2019 that, purportedly, will “determine the appropriate salary level for exemption of executive, administrative and professional employees.”  This has been expected for some time, and the DOL has repeatedly extended the expected release date.  The last we had heard, it would be January 2019.  Now it is delayed to March.

In 2016, revisions for these exemptions (containing among other changes a $47,476 annual salary requirement) were finalized by the Obama administration, but a federal judge enjoined them days before they were to take effect.  Although the injunction was appealed, the Trump administration soon abandoned its defense of most of the rule and the court eventually declared it permanently invalid and unenforceable by the DOL in August 2017.  The DOL appealed, but asked the court to wait to move forward with the appeal until after the DOL issued a new rule.  This new rule is what we have all been waiting for.

The DOL has not revealed the details of this new NPRM, but Secretary of Labor Acosta and others have implied that the new salary test will be in the $33,000/year range.  There presently is no indication of  plans to address anything in the NPRM other than the minimum required salary amount.    

FLSA Regular Rate for the Calculation of Overtime Pay

The DOL’s Fall 2018 agenda states that “changes in the 21st century workplace are not reflected in its current regulatory framework”, and announces plans to issue a NPRM in December of 2018 “to clarify, update, and define basic rate and regular rate requirements under….the FLSA.” 

Most employers are generally unaware of the complex, but little-used “basic rate” method for calculating overtime pay.  This  is a statutory alternative to – and is completely different from -- the “regular rate” of pay.  The basic rate method permits, under specific conditions, the use of a pre-authorized basic rate from which overtime is paid at one and one half times the basic or established rate. 

The “regular rate” is a FLSA concept requiring that most types of non-exempt employees’ compensation be included along with the hourly rate when computing overtime premium pay.  This includes commission, incentive pay, non-discretionary bonus pay, and more.  Changes to the regulations addressing the regular rate of pay, the method most often used to calculate overtime premium pay, could have quite an impact on employers.   

Joint Employment Under the FLSA

The Fall 2018 DOL Regulatory Agenda states: “Consistent with the Administration’s priorities to enact administrative reforms and provide clarity to enhance compliance, the Department is considering changes to its regulations concerning joint employment under the Fair Labor Standards Act.”  This NPRM is slated for issue in December 2018.  

Under the FLSA and FMLA, employers who are determined to jointly employ a worker may be held mutually liable for violating the rights of the shared employee.  The Obama DOL’s 2016 Administrator’s Interpretation, that urged a more expansive definition of joint employment under the FLSA, was withdrawn by the Trump DOL in June 2017.

Although the Wage and Hour Division has rescinded its most recent guidance, it has yet to issue regulations clarifying what constitutes joint employment.  While predictions are dangerous at best, we hope the NPRM will bring the rules for joint employment in line with recent court decisions requiring that businesses have actual control over employees in order to be considered joint employers.  (The NLRB is scheduled to address this issue as well.)

Tip Regulations under the FLSA

In the Fall 2018 Agenda, the DOL states: “In the FY 2018 Consolidated Appropriations Act, Congress amended multiple provisions of the Fair Labor Standards Act with respect to an employer's use of its employees tips and provided that portions of the Department's 2011 rule regarding tips shall have no further force or effect until any future action taken by the Department.  In this Notice of Proposed Rulemaking, the Department will align its regulations with the recent statutory changes.”

The 2011 rule maintained that employers had no right of control over an employee’s received tips, even if the employee was paid the minimum wage or higher by the employer.  These rules were challenged in court, and were eventually statutorily eliminated by Congress in the FY 2018 Appropriations Act.  The Tip Income Protection Act (the name for this section of the Appropriations Act) returned to a previous DOL enforcement position that allows tip pools for tipped and untipped employees as long as all in the pool get paid minimum wage without use of the tip credit.  It also prohibited managers and supervisors (and owners) from participating in tip pools.  This NPRM will bring the regulations in line with this statutory change.

The issue date for this NPRM is listed as October of 2018, so it clearly will be issued later than anticipated.

Expanding Employment, Training, and Apprenticeship Opportunities for 16 and 17 Year-Olds in Health Care Occupations under the Fair Labor Standards Act  

 “In this Notice of Proposed Rulemaking (NPRM), the Department will consider whether it should amend Hazardous Occupations Order No. 7 (occupations involved in the operation of power-driven hoisting apparatus) to reflect current economic and work environments and allow for safe and meaningful employment opportunities for youth in healthcare.”

At present, under the FLSA’s child labor regulations, employees under the age of 18 may not operate powered patient lifts in hospitals, nursing homes, etc., without adult supervision.  The NPRM will propose to allow 16 and 17 year-olds to operate these types of lifts.

The NPRM was issued on 9/27/2018; the comment period closes 11/26/18.

Conclusion

Overall, the DOL’s 2018 Regulatory Plan emphasizes regulatory restraint and the current administration’s commitment to a more business-friendly regulatory framework, noting:

• “In general, the [DOL] will work to assist employees and employers to meet their needs in a helpful manner, with a minimum of rulemaking.”

• “The [DOL’s] regulatory actions will provide American employers with certainty about workforce rules. The [DOL’s] regulatory plan will make employers’ obligations under current law clear, while respecting the rule of law.”

It remains to be seen whether the changes proposed by DOL will achieve their stated goals.  Regardless, employers who struggle with FLSA compliance, or who have concerns about the increase in wage and hour litigation, will no doubt welcome regulatory changes that make compliance easier to understand and accomplish.  In addition, the NPRM electronic notice-and-comment rule-making process gives employers the ability to educate the DOL about the real world economic, practical, and business implications of the proposed regulatory changes.  If you want to be heard on these issues, take advantage of these opportunities and submit your comments.